A case to raise petrol, diesel prices by Rs 25–28 per litre after Bengal, Tamil Nadu elections: Kotak Institutional Equities

Petrol and diesel prices in India could rise once the ongoing Assembly elections end on April 29, a report by Kotak Institutional Equities has indicated. As per the report, at current crude levels of around $120 per barrel, the gap between global oil costs and domestic retail prices has widened significantly, making it difficult for refiners and the government to hold prices steady for much longer. However, the Ministry of Petroleum and Natural Gas has clarified that there is no such proposal under consideration by the government.

How the Rs 25–28 estimate was calculated

Kotak’s projection of a Rs 25–28 per litre increase is based on crude oil staying close to $120 per barrel. At this level, the cost of refining and selling fuel far exceeds current retail prices. Kotak has illustrated multiple scenarios where the prices could be hiked over a period of time.

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However, the report indicates that any price hike is unlikely to happen all at once. Instead, a phased increase over weeks or months appears more likely, as policymakers try to balance inflation concerns with the need to reduce losses. "However, political considerations will likely prevail and actual hikes may be more modest," the report said.

Reacting to the report, the Petroleum Ministry has issued a statement. "There are some news reports suggesting a price hike of petrol and diesel. It is hereby clarified that there is no such proposal under consideration by the Government," he said.

"In fact, India is the only country where petrol and diesel prices haven’t increased in the last four years. Govt of India and Oil PSUs have taken relentless steps in order to insulate the Indian citizens from steep increases in international prices," it added.

What it means for consumers

For consumers, such a hike would be substantial. Petrol prices currently hover around Rs 94–96 per litre in major cities. A rise of Rs 25–28 could push prices close to Rs 120 per litre, a level never seen before in India.

The impact would go beyond fuel stations. Higher fuel costs typically raise transportation expenses, increase delivery charges, and influence demand in sectors like automobiles and rural markets. In short, a spike at the pump often trickles down to everyday expenses, making it a concern for households across the country.

City	Petrol Now (₹)	Diesel Now (₹)	Petrol (+₹25)	Diesel (+₹25)	Petrol (+₹28)	Diesel (+₹28)
New Delhi	94.77	87.67	119.77	112.67	122.77	115.67
Mumbai	103.50	90.03	128.50	115.03	131.50	118.03
Chennai	100.80	92.39	125.80	117.39	128.80	120.39
Kolkata	105.41	92.02	130.41	117.02	133.41	120.02
Bengaluru	102.92	90.99	127.92	115.99	130.92	118.99
Hyderabad	107.46	95.70	132.46	120.70	135.46	123.70

A widening gap that can’t be ignored

The report, cited by CNBC-TV18, points to a growing mismatch between what India pays for crude oil and what consumers pay at fuel stations. This gap has now reached a level where state-run refiners are absorbing heavy losses every month.

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Kotak estimates that oil marketing companies are currently losing nearly Rs 270 billion every month. This sustained pressure has raised concerns about how long such losses can continue without a price correction.

The refiner bleeding: Rs 270 billion a month

According to Kotak Institutional Equities, as reported by CNBC-TV18, the incremental burden on refiners from the gap between crude costs and retail prices has reached approximately Rs 270 billion per month, a figure that is simply not sustainable over an extended period.

The government has attempted to ease the situation by cutting excise duty by Rs 10 per litre and reintroducing windfall export taxes. However, the brokerage notes that these steps offer only limited relief and do not address the underlying pricing imbalance.

What’s pushing crude prices higher

The rise in global crude oil prices is largely linked to tensions in West Asia, which have disrupted key supply routes. One major concern is the Strait of Hormuz, a crucial passage for global oil shipments.

Although there was a brief window when Iran allowed transit during a ceasefire phase, renewed tensions have tightened supply again. This has kept markets volatile and prices elevated.

Kotak also highlights a growing gap between crude futures and physical oil prices. This trend usually signals ongoing supply stress and suggests that prices may remain high in the near term.

India has felt the impact directly. Even as import volumes dropped by 13–15 percent in March and April, the country’s crude import bill rose sharply by an estimated $190–210 million per day.